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TMI Blog2019 (9) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... erest u/s. 244A of the Act. Copy of the order is placed on record. 3. Ld. DR vehemently supported the orders of the Assessing Officer. 4. We have heard the rival submissions, perused the orders of the authorities below and the decision relied on. The issue of whether refund shall be adjusted against interest payable and balance, if any, shall be adjusted towards tax payable has come up for consideration in assessee's own case for the A.Y. 2008-09 and the Coordinate Bench of the Tribunal held that the Assessing Officer while computing the interest u/s. 244A shall adjust the amount of refund already granted first towards the interest component and balance left, if any, shall be adjusted towards the tax component. While holding so, it has been observed as under: - "3.4. We have gone through the facts of this case and submissions made by both sides, provisions of law as well as judgments placed before us. It is noted that the only issue to be decided by us is that while granting the refund in pursuance to the appeal effect order, whether the amount of refund granted earlier should be adjusted first against the interest component of the earlier refund and thereafter the balance amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is duty bound to pay the outstanding tax, amount paid by the assessee shall first be adjusted against interest payable and the balance shall be adjusted against tax payable, the same procedure needs to be followed in respect of refund due to the assessee i.e., the amount shall first be adjusted towards interest payable and balance, if any, shall be adjusted towards lax payable (in the instant case tax refundable to the assessee). 5. Learned counsel, appearing on behalf of the assessee, pleaded accordingly. On the other hand learned Departmental Representative submitted that the assessee is not entitled to interest on interest. However with regard to the plea of the assessee that ii does not amount to payment of interest on interest but only adjustment of the refund from the Revenue against interest component first and thereafter against tax component, in which event u/s. 244A assessee is entitled to interest on the tax component, learned Departmental Representative could not place any decision contrary to the decision of Hon'ble Delhi High Court cited by learned counsel for the assessee 6. We have carefully considered the rival submissions. As rightly pointed out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs. 45,73,528/-. The principal amount of Rs. 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of "amount due" under Section 244A." 15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Limited (supra) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amount to payment of interest on interest. An example will clarify the situation and help us to understand what is due and payable under Section 244A of the Act. Suppose Revenue is liable to refund Rs. 1 lac to an assessee with effect from 1st April, 2010, the said amount is refunded along with interest due and payable unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed is paid by the assessee then it shall first be adjusted towards interest payable and balance if any whatever tax payable. Now, if we go through section 244A, we find that no specific provision has been brought on the statute with respect to adjustment of refund issued earlier for computing the amount of interest payable by the revenue to the assessee on the amount of refund due to the assessee. Thus, the law is silent on this issue. Under these circumstances, fairness and justice remands that same principle should be applied while granting the refund as has been applied while collecting amount of tax. The revenue is not expected to follow double standards while dealing with the tax payers. The fundamental principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) with the same respect, honesty and fairness as it expects from its citizens. It is further noted by us that Hon'ble Delhi High Court has already decided this issue in clear words which has been followed by the Tribunal in assessee's own case in the earlier years. It is further noted by us that assessee is not asking for payment for interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/ deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company. 38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debtowed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and Revenue the only issue is in respect of disallowance made u/s. 14A r.w. Rule 8D of I.T. Rules. Assessee has raised the following grounds in its appeal: - "Disallowance u/s. 14A 1.1. The CIT(A) erred in directing the AO to follow the order of the Hon'ble ITAT for the A.Y. 2010-11 without appreciating that Rule 8D was applicable in that year and not in current year. 1.2. The CIT(A) ought to have followed the order of Hon'ble ITAT for A.Y. 2006-07 wherein on similar facts it was held that no disallowance was warranted in appellant's case." Revenue has raised the following grounds in its appeal: - "1. On the facts and in circumstances of the case and in law, the Id. CIT(A) erred in restoring the issue back to the file of A.O regarding the disallowance of Rs. 12,50,94,133/-, made by the A.O. u/s 14A r.w.r. 8D of the Act, when the A.O. was not satisfied with the disallowance of mere proportionate expenses of Rs. 37,12,465/- made by assessee itself.'' 2. The appellant prays that the order of the Id. CJT(A) on the above ground be set aside and that of the Assessing Officer restored." 8. Briefly stated the facts are that, the Assessing Officer while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 6978/Mum/2013 and 6979/Mum/2013 dated 31.07.2015 submits that identical issue when the provisions of Rule 8D have no application, has been considered by the Tribunal in the second round of appeal, when the Assessing Officer in spite of Tribunal holding that Rule 8D have no application repeated the said disallowance came to be decided in favour of the assessee deleting the disallowance made u/s. 14A of the Act. Copy of the order is placed on record. 11. Ld. Counsel for the assessee further referring to the said orders submits that the Tribunal following the decision of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. [313 ITR 340] and CIT v. HDFC Bank Ltd [366 ITR 505] held that since assessee has interest free funds more than the investments and assets earning tax free income, no disallowance is required u/s. 14A of the Act. The Ld. Counsel submits that the said order of the ITAT for A.Y. 2005-06 and 2006-07 be followed and the disallowance be deleted. 12. Ld. DR vehemently supported the orders of the authorities below. 13. On hearing both the parties and perusing the orders of the Authorities below and the order of the Tribunal in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. In the result, appeal of the assessee and appeal of the Revenue are partly allowed. ITA.No. 1802/M/2018 [Assessee's Appeal arising from 143(3) r.w.s. 147 Order] ITA.No. 2232/M/2018 [Revenue's Appeal arising from 143(3) r.w.s. 147 Order] 16. The assessee in its appeal challenged the very reopening and validity of reassessment order passed u/s. 143(3) r.w.s. 147 of the Act by raising the following grounds: - "1.1 The CIT(A) ought to have appreciated that AO order for reopening is beyond jurisdiction since the same overrides the order of Hon'ble ITAT on the issue of allowability of deduction u/s 36(1)(viia) for the same assessment year in ITA no. 6349/Mum/2010 dated 18.01.2013. 1.2 The CIT(A) erred in stating that the ground on jurisdiction is academic despite being pointed out that the AO sought to reopen the assessment by overriding the express direction of Hon'ble ITAT to allow the claim. 1.3 The CIT(A) ought not have directed the AO to follow the order of Hon'ble ITAT for the AY 2009-10 in respect of deduction u/s 36(1)(viia) despite the order of Hon'ble ITAT for the same assessment year allowing the claim of the appellant. On merits assessee raised the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad and doubtful debts u/s. 36(1)(viia) of the Act is distinct and independent of the provisions of section u/s. 36(1)(vii) of the Act relating to allowance of bad debts and the deductions have to be allowed independently. 19. Coming to restricting the allowance for deduction u/s. 36(1)(viia) of the Act being the provision made for doubtful debts the Tribunal held that provisions of section 36(1)(viia) of the Act are very clear and provides that in respect of "any provision" made for bad and doubtful debts, an amount not exceeding 7.5% of the total income and an amount not exceeding 10% of the aggregate average advances of the rural branches of such bank shall be allowed as deduction. The Tribunal also held that allowance u/s.36(1)(viia) of the Act is quantified not with reference to the amount provided in the said account, but with respect to certain percentage of total income and certain percentage of aggregate average advances. 20. Subsequently, the Assessing Officer reopened the assessment by issue of notice u/s. 148 of the Act dated 28.03.2014 and the reassessment was completed on 26.03.2015 by re-computing the allowance for deduction u/s.36(1)(viia) of the Act on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening is beyond jurisdiction and bad in law. Reliance is placed on Supreme Court judgement in the case of Kelvinator of India Ltd. [320 ITR 561]. 24. Ld. Counsel for the assessee further relied on the decision of Gujarat High Court in the case of Qx Kpo Services (P) Limited wherein it was held that reopening cannot be done to examine another facet of the same claim and SLP filed by the department was rejected by Supreme Court [99 taxmann.com 301]. 25. Coming to merits Ld. Counsel for the assessee further submits that the issue of deduction u/s 36(1) (viia) was a matter of appeal in the order u/s 143(3) by the department before Hon'ble ITAT. Accordingly, it is submitted that an issue which has been agitated in the order u/s 143(3) cannot be a ground for reopening u/s 147 of the Act. He submits that the Hon'ble ITAT in ITA No.6349/Mum/2010 dated 18.01.2013 had dismissed appeal filed by the department and held that deduction u/s 36(1)(viia) is to be allowed based on eligible amount calculated at 7.5% of total income and 10% of aggregate average advances of rural branches irrespective of the provision made in the books of account. 26. Ld. DR vehemently supported the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lect the information that the provision for doubtful debts is inclusive of provision for standard assets and provision for restructuring of accounts. Nowhere in the reasons recorded, the Assessing Officer stated that any tangible materials/information to show that provision for bad and doubtful debts includes provision for standard assets and provision for restructuring of accounts have come on record subsequent to completion of assessment. In the reasons recorded the Assessing Officer states that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Except stating that there is a failure of the assessee, he has not pointed out what is the failure of the assessee to disclose fully truly all material facts. Nothing has been brought on record to suggest that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment. Therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts for completion of assessment, assessment cannot be reopened beyond four years from the end of the relevant Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts. 34. Learned Counsel for the assessee submits that this issue has been restored by the Tribunal in ITA.No. 6922/Mum/2013 dated 17.12.2015 to the file of the Assessing Officer for the very same Assessment Year in the original assessment proceedings and therefore assessment should not have been reopened. He also submits that there are no tangible materials came on record suggesting escapement of income, therefore reopening should not have been made. 35. Ld. DR vehemently supported the orders of the Assessing Officer. 36. On a perusal of the appeal of the Revenue for A.Y. 2009-10 in ITA.No. 6922/Mum/2013 dated 17.12.2015, we notice that the Tribunal set-aside the issue of as to whether the deduction u/s. 36(1)(viia) of the Act is to be allowed as per provisions of the statute or based on the provision made in the Books of Accounts to the file of the Assessing Officer and directed to decide the issue in the light of the decision of the Tribunal Ahmadabad Bench in the case of DCIT v. Sarvodaya Sahakari Bank Ltd in ITA.No. 779/AHD/2011. We also notice that similar issue had come up before the Tribunal for the A.Y. 2005-06 in ITA.No. 6920/Mum/2013 in Revenue's appeal and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned ( hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year." 3.1.3.5. The section merely says that the AO has to have reason to believe that any income chargeable to tax has escaped assessment. Reason to believe can be on the basis of any information which comes to his possession or knowledge. This information is more than enough for any reasonable person to form a reason to believe that income has escaped assessment. In the instant case, the appellant after going through various documents of the appellant, previous records and factual data had come to a conclusion that the income has escaped assessment. The AO or any reasonable person in his place would not ignore or over look any factual or legal information which comes to its knowledge. If the AO is not satisfied with the reason, he would not have issued notice u/s.148. The very fact that reasons are recorded and notice u/s.148 is issued goes to show that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision made in the Books of Accounts or as per the statute provided in the section itself in the original assessment proceedings has bearing on the issue of allowance u/s. 36(1)(viia) in the reopened assessment, the issue thus in a way became consequential and should go back to the Assessing Officer for fresh adjudication depending upon the decision taken by the Assessing Officer in the original assessment proceedings which were set aside by the Tribunal in ITA.No. 6922/Mum/2013 by order dated 17.12.2015. Thus, we restore this issue on merits i.e. allowability u/s. 36(1)(viia) of the Act in the reassessment proceedings to the file of the Assessing Officer to decide afresh in view of our above observations. This ground is allowed for statistical purpose. 42. In the result, appeal of the assessee is partly allowed for statistical purpose. 43. Coming to the Revenue's appeal, the following grounds were raised in its appeal: - 1 "On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in restoring the issue back to the file of Assessing Officer by following the consolidated order of ITAT in ITA No's 6921/M/2013 for A.Y. 2007-08, ITA No.'s 6980 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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